Spring 2016 Real Estate Market - Boots on the Ground? (Boston: house, buy)

[pennyone]

Originally Posted by Parsec

A disaster will also affect their future ability to afford what they can comfortably afford today. It's not for everyone, but people in certain job fields can reasonably expect their incomes to rise substantially over the course of 5 years. A disaster such as an expensive medical condition will screw them either way.

Certainly, but a strong ability to save instead of stretching will allow you to deal with many of the negative possibilities with much more resources, and correspondingly limit the number of scenarios where everything hits the fan. I think it's foolish to stretch yourself uncomfortably and forgoing your ability to have any saving with some optimistic expectation of promotions in the future.

[pennyone]

Originally Posted by Nanotube

I can understand the stretching part but it'd be too scary for me to pull it. Looking back, I wish I had taken the risk and bought a bigger house and potentially "made more money" when selling it.

It could have turned out the other way too. It was a gamble and your conservatism may have lost out on this one, but over time, I bet you will be on the winning ledger.

[BostonMike7]

Originally Posted by MikePRU

Clearly part of the problem here is that my definition of "stretch" is not the same as yours. What you're describing I would refer to as financial idiocy. Stretching in my mind is a much milder situation than what you're describing.

Sadly, i see threads all the time elsewhere on the boards (these and others) describing such financial idiocy.

I wouldn't put it past anyone these days to put down 3% on a $600K house and then blow their reserves the first money on furniture leaving them pretty much living paycheck to paycheck after that point.




But yes, that is an extreme example of stretching. I think i more milder example would be sacrificing eating out, or giving up gym memberships, cable, etc to make a slightly higher than comfortable mortgage with the idea what raises and promotions will slowly allow you to bring those things back into your life.

[Parsec]

Originally Posted by MikePRU

Clearly part of the problem here is that my definition of "stretch" is not the same as yours. What you're describing I would refer to as financial idiocy. Stretching in my mind is a much milder situation than what you're describing.

Originally Posted by pennyone

Certainly, but a strong ability to save instead of stretching will allow you to deal with many of the negative possibilities with much more resources, and correspondingly limit the number of scenarios where everything hits the fan. I think it's foolish to stretch yourself uncomfortably and forgoing your ability to have any saving with some optimistic expectation of promotions in the future.

I completely agree. We may be talking about different degrees of stretching here as MikePRU pointed out. For me personally I paid around $650k for my house and my mortgage is barely 10% of my gross income. This allows me to max out my retirement accounts and keep 1 year of expenses in savings for an emergency fund. I could have stretched to buy a $1M house, but then my payments would be around 25% of my gross and I would only be saving the "minimum" of 10% for retirement. This is still completely acceptable for some people, but I'm financially conservative. I'm "probably" going to be able to comfortably afford the $1M house 5-10 years down the road, but maybe I'll just buy a vacation home instead. Isn't that what you did? You were conservative when you purchased your 1st home, but as your career progressed you used your extra income to buy a house on the Cape?

[BostonMike7]

Originally Posted by Parsec

You were conservative when you purchased your 1st home, but as your career progressed you used your extra income to buy a house on the Cape?

That's what I'd rather do. Or buy investment properties. Or further my retirement account so I can be playing golf every day when I'm 60 rather than worrying about if I can afford to retire in 5-7 years.


I don't really need or want a $1mil house. With $1mil houses come $1mil in upkeep sort of expenses. I just feel like that $$ could be better utilized in something else, like a vacation house on a Lake in NH/ME, or investing in some income generating properties.

[Shrewsburried]

Stretching only makes sense when the "stretch" is opportunistic and has real long term advantages. For example, I should have "stretched" in 2009 when the market bottomed, I recognized it was near bottom, and my income was increasing an average of 12% annually. I didn't. Instead, I ended up paying more for a similar home which required much more compromise in terms of location and issues ... I also missed out on 4 years of equity building and significant appreciation.

But to stretch when RE prices and interest rates are stagnating seems like an unnecessary invitation for anxiety (or worse) for buyers who have established careers. This said, most of my regrets are risks I didn't take ... and as I watch my peers in Arlington, who can barely afford their mortgage, have their home appreciate $180K in 3 years I'm beginning to question who's more intelligent. "I'd rather be lucky than good."

[pennyone]

Originally Posted by Parsec

I completely agree. We may be talking about different degrees of stretching here as MikePRU pointed out. For me personally I paid around $650k for my house and my mortgage is barely 10% of my gross income. This allows me to max out my retirement accounts and keep 1 year of expenses in savings for an emergency fund. I could have stretched to buy a $1M house, but then my payments would be around 25% of my gross and I would only be saving the "minimum" of 10% for retirement. This is still completely acceptable for some people, but I'm financially conservative. I'm "probably" going to be able to comfortably afford the $1M house 5-10 years down the road, but maybe I'll just buy a vacation home instead. Isn't that what you did? You were conservative when you purchased your 1st home, but as your career progressed you used your extra income to buy a house on the Cape?

Yes that's what we did. But we don't have kids so our example is a little different. Kiddies throw a huge wrench into any financial calculation, for better or worse. I agree with you about a matter of degree and obviously we are all pretty financially responsible. A 650K is plenty comfortable.

[hken]

We are looking to upgrade our home (mine is going on the market soon) in the Metrowest and it seems that once you get into that $900K+ range, houses take a little longer to sell meaning you don't put a ridiculous over asking no contingency offer.

[chicagoliz]

Originally Posted by hken

We are looking to upgrade our home (mine is going on the market soon) in the Metrowest and it seems that once you get into that $900K+ range, houses take a little longer to sell meaning you don't put a ridiculous over asking no contingency offer.

We saw a few that did, although we were lucky that it was not the situation with the house we bought. But I recall one in particular that had a TON of people on a Tuesday morning, traipsing around with their own inspectors to do an "inspection lite" so they could place an offer with no contingencies and offers were due the next day at noon. The house sold right away, and even though it was February, the owners did not want to vacate until May.

[MikePRU]

Originally Posted by hken

We are looking to upgrade our home (mine is going on the market soon) in the Metrowest and it seems that once you get into that $900K+ range, houses take a little longer to sell meaning you don't put a ridiculous over asking no contingency offer.

Where in Metrowest are you looking? A lot depends on the town. A $900K house is going to take a lot longer to sell and get fewer offers in Shrewsbury than it would in Wellesley for example. As a rule of thumb though, the higher you get in price the fewer buyers there are who can afford those homes.